NEW YORK — The slew of trade-preference pacts the U.S. has struck with countries in Latin America, the Caribbean, Africa and the Middle East for the past few years has created many opportunities for apparel economies to find new production options and for developing nations to find economic growth.
But they’ve also created new options for companies that want to cheat the quota system.
“The government has significant concerns about textiles and apparel coming in illegally from restricted markets,” said Richard J. Wilson, an import specialist with the Bureau of Customs & Border Protection, at a forum sponsored by the American Apparel & Footwear Association and U.S. Commercial Service in Manhattan last week. He said the pacts offer “an extra incentive for those people who don’t want to work aboveboard.”
That’s one reason for the meticulous attention that Customs is paying to the paperwork accompanying apparel being imported into the U.S. under the Caribbean Basin Trade Partnership Act, the African Growth & Opportunity Act and Andean Trade Promotion & Drug Eradication Act. Wilson and other speakers at the event focused on how legitimate importers can avoid having their shipments detained by Customs and how, if they are detained, to handle that situation quickly and properly.
Beth Ring, a partner at the trade law firm of Sandler, Travis & Rosenberg, who is based in New York, said importers should insist their suppliers take great care in preparing the certificates of origin they must have when their goods arrive in port.
“Customs routinely asks, particularly in Miami,” she said.
The certificate of origin must explain the source of all the materials used in the garments being imported and show that they comply with the sometimes-complicated rules of the various trade deals.
For instance, to qualify for the CBTPA program, a pair of jeans sewn in the Caribbean would have to be made of denim woven in the U.S. But if a garment is made of a knitted fabric, the knitting could take place in the Caribbean region, so long as the yarn was spun in the U.S.
Wilson said Customs’ key concern is that Asian fabric producers whose products wouldn’t be eligible for the program will try to transship goods through beneficiary countries to work around the quotas.
To ensure that isn’t happening, the bureau sends out Textile Procurement & Verification Teams, also known as “jump teams,” to inspect factories.
The best way importers can avoid being sold illegally transshipped goods, he said, is to keep a close eye on their suppliers and use some common sense. He pointed out a few cases that should obviously raise an importers’ suspicions — and that would likely prompt an inspection by Customs.
One case is sudden, unexplained price shifts, he said: “If for some unknown reason, it’s dropped from $10 a dozen and now it’s 10 cents a dozen, something is suspicious.”
Another case of suspicion would be if a factory suddenly starts offering products that require different machinery than they had previously. For instance, he said, if a vendor that had been supplying fine-gauge knit sweaters suddenly offers to sell jeans, “maybe it’s a good idea to go there and see what’s going on.”
Wilson underlined the importance of sending sourcing managers or agents to personally tour factories from a company who plans to buy, because factories that raise Customs’ suspicions are likely to draw a visit from a jump team.
“I can’t tell you the number of times we walk into a factory and it’s simply for show,” he said, “Eighty to 90 percent of the workers don’t know how to sew, or their machines are going, but they’re not loaded with thread.”
If a factory draws a visit from a jump team and there’s evidence that the factory has transshipped merchandise, it’s likely that Customs also will start detaining goods it has shipped, said attorney Ring. She pointed out that Customs does not publicly identify the factories it visits, so importers have no way of knowing a supplier’s factory was visited unless they are told so.
But, she said, if Customs starts detaining shipments from a factory, an importer can expect that further detentions will follow.
“It’s mind-boggling, what you have to give to get a detained shipment released,” she said.
Detained shipments are only released by Customs if the bureau is presented with documentation showing from where all the materials in the products came and proving that each step of manufacturing was completed where the factory claims it was. That means the bureau expects everything from invoices for fabric to the individual sewing tickets showing when each item in a container was completed.
Ring said once an importer sees a shipment from a particular factory detained, that importer should ask the supplier to send all the supporting documentation along with each subsequent order. That at least ends the delay of needing to go back to look for the documentation.
“It must be a condition of your contract,” she said, “that [factories] maintain these records for a year from the date they ship the goods to you.”